Good inexpensive rental market with best potential appreciation

14 Replies

Hi everyone! I'm a newbie from Hilton Head,SC. Looking to buy inexpensive small multi-family rentals. There are none here so I'm looking in surrounding markets such Savannah, GA, Charleston, SC or Jacksonville, Fla. Does anyone currently work these markets or have information on them? Thanks

Inexpensive and appreciation don't normally go together. It sounds like you want a market with a history of very poor appreciation that will suddenly turn the corner and start appreciating at a rapid clip starting the day after you close escrow. I wish you luck on that one ...

Thanks for the replies. David. No I'm not expecting for something to skyrocket the day after I close. What I'm looking for is a market not too far from me that has turned the corner and is in the early stages of expansion so I can get some market appreciation to go along with forced appreciation if possible but my primary concern is cash flow. If I can get the appreciation though I will attempt to to sell using a 1031 exchanging into a larger property with a larger cash flow in another market in expansion and repeat.

Not quite.

Cash flow and appreciation expectations normally have a inverse correlation because expected appreciation or depreciation is "baked" into the current ARV for future resale expectations

However if you choose an appreciating market you can often get an inexpensive house with the same or even more appreciation potential than an expensive house in that same market. However the cash flow still likely won't be as good as an inexpensive house in a depreciating market

The trick is to understand correctly the demographics of the market you are buying into to eliminate unsystematic risk.

I'd be happy to have you join our market, Jacksonville is an up-and-coming city and I firmly believe that the rising tide lifts all ships. That said, I caution that Jax prices have gone up a lot in the past 5 years. No doubt there are areas of the city that still have a lot of room for growth, and in general the outlook for the region is really positive, but just saying things have heated up a lot that I would caution all investors new to the area to really tread carefully. 

@Ralph Ellenburg, I invest in 4 metropolitan cities in 3 states including Jax and watch markets in others. Jacksonville is one of the most diverse cities for investing in real estate that I've keep numbers on. There is a market niche  for every investor type. The A,B  markets are a little crowed which I think will top shortly. There's new constructed homes staring at $145k price points which really tightens the buyer base for older A,B markets, the true value in these homes are lot size with value added rehabs.

I agree with the inverse relationship with cash flow and appreciation in these rentals under $100k.  A retail price will be priced according to market forces.  If it's too cheap, you are probably spending a lot to rehab the house and it's probably in a depressed area (not necessarily warzone) and not going to appreciate rapidly.  But your cash flow is probably really good.  Appreciation is always a bonus, not a given, otherwise you're just speculating.

I have a duplex in Walterboro that finished the rehab this week with screened tenants moving in next week. It's price is $80k ($40k per door) with $490 monthly rent per side with close to 10% ROI.

Depending on the number of units you are looking to invest in you should also be aware that the value of the property is driven by the rental income and is unaffected by the areas appreciation rates. If your rates are not at market you are devaluing your investment property, except in the case of SFHs which will resell at a higher rate if there is no tenant in place at time of sale. 

Every time you raise your rents you increase the resale value of a multi unit rental property.

Hi all, I am a Realtor as well as an active investor in the Jacksonville market. The Jacksonville market is in the top 10 hottest markets in the nation right now. Please feel free to contact me regarding investment opportunities or just market information and rental income.